PnL (Profit and Loss) is the financial statement that summarizes the revenue, costs and expenses incurred during a specified past period or forecasted in a future period.
The PnL forecast is the ideal report to depict the specific figures of a growth plan. Depending on the business model, it usually covers an 18 or 36 months period.
During the research phase, there may be more than one PnLs, describing different approaches of the implementation of a business.
WHAT’S INCLUDED AT A PnL?
Revenue includes the forecasts of the growth plan in full detail. Specifically, how many customers are expected, from which sales channels and how much money they will bring in the business.
Expenses are separated to Selling, Operating and Administrative expenses.
Finally, the results include EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) and Net profit or loss.
WHAT IS IT USEFUL FOR?
First of all, when a new business or a new business model is in the making, the PnL statement helps defining the growth strategy that needs to be followed. Of course, it even plays a major role in giving the green light or halting an investment.
Moreover, every time that an entrepreneur approaches a potential investor or a bank, having the PnL at hand may save valuable time an affect the outcome.
However, the time that a PnL shows its great value is during the execution of a growth plan. At this stage, the real figures are compared to the forecasts at the end of each month. When we fall behind targets, the PnL indicates what exactly went wrong and helps us fine tune the future strategy. On the other hand, when a tactic proves to be mor successful than expected, we must add more of this in the mixture of the growth plan.
In any case, the PnL helps us stay in line with our strategy in our daily operations and it always reminds what’s important:
It’s the bottom line that matters!
